ARTICLE IN PRESS

Marine Policy ] (]]]]) ]]]–]]] www.elsevier.com/locate/marpol

Catch-quota balancing in multispecies individual fishing quotas

James N. Sanchiricoa,Ã, Daniel Hollandb,1, Kathryn Quigleyc, Mark Finad

aResources for the Future, 1616 P Street NW, Washington, DC 20036, USA bGulf of Marine Research Institute, 350 Commercial Street, Portland, ME 04101, USA cNational Marine Fisheries Service, 7600 Sand Point Way NE, Bldg. 1, Seattle, WA 98115, USA dNorth Pacific Fishery Management Council, 605 W 4th Avenue, Suite 306, Anchorage, AK 99501, USA

Received 5 December 2005; accepted 19 February 2006

Abstract

Individual fishery quotas (IFQs) are an increasingly prevalent form of fishery management around the world, with more than 170 species currently managed with IFQs. Yet, because of the difficulties in matching quota holdings with catches, many argue that IFQs are not appropriate for multispecies fisheries. Using on-the-ground-experience with multispecies IFQ fisheries in Iceland, New Zealand, Australia, and Canada, we assess the design and use of catch-quota balancing mechanisms. Our methodology includes a mix of interviews with fishery managers, industry representatives, and brokers, literature review, and data analysis. We find that a combination of incentives and limits on use rates for the mechanisms provide sufficient flexibility to the quota owner without the fishery manager incurring excessive levels of overexploitation risk. Contrary to some opinions, these programs are evidence that it is possible to implement IFQ programs for multispecies fisheries and that they can be profitable and sustainable. r 2006 Published by Elsevier Ltd.

Keywords: Natural resources; Created markets; Tradable permits

1. Introduction have some ability to alter the species composition of their catch either by location choices, timing of trips, or Individual fishery quotas (IFQs) provide individuals or alteration of fishing methods, it is almost inevitable that companies with rights to a share of the total allowable individual fishers’ species mix of catch will not exactly catch (TAC) from a fish stock.2 They are an increasingly match their ex ante portfolio of catch rights. Critics of prevalent form of fishery management, with more than 170 multispecies IFQ systems often cite ‘‘catch-quota balan- species in Iceland, New Zealand, Canada, and Australia cing’’ as an insurmountable problem [6]. currently operating under an IFQ. More importantly, Fishery managers have addressed this difficulty by research has shown that they can be effective in improving allowing market transactions, such as permanent and the profitability and sustainability of fisheries [1–5]. temporary transfers of quota. Management systems permit Multispecies fisheries, however, can present particular ‘‘retrospective balancing’’ or trades after landings are made difficulties for IFQ management because it is very difficult to allow a fisherman to cover overharvest of quota. to know ex ante the catch composition [8]. While fishers Managers also have used non-trading mechanisms to aid in balancing catches with quota holdings. These include ÃCorresponding author. Tel.: +1 202 328 5000. rollover provisions, such as carrying forward or back of E-mail addresses: [email protected] (J.N. Sanchirico), quota, ‘‘deemed value payments,’’ under which fishers are [email protected] (D. Holland), [email protected] charged a fee for each unit of catch they land above their (K. Quigley), [email protected] (M. Fina). quota, or permitting fishers to surrender or discard catch 1 Work on this project was started while Dan was senior economist at they cannot match with quota. Some programs also permit SeaFic in New Zealand. 2We use IFQ interchangeably with individual transferable quota (ITQ), ‘‘cross-species’’ exchanges where quota of one species can the term used in the New Zealand and Australia fisheries, and individual be used to cover catches of another species at a prescribed vessel quota (IVQ), the term commonly used in Canada. trading ratio.

0308-597X/$ - see front matter r 2006 Published by Elsevier Ltd. doi:10.1016/j.marpol.2006.02.002 ARTICLE IN PRESS 2 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]]

All of these mechanisms introduce flexibility into the balancing mechanisms are used, potential for TACs being system for the benefit of the individual quota owner. The exceeded, and more subjective criteria, such as perceptions costs of this additional flexibility, however, can be a loss of of fishery stakeholders and managers. precision in TAC management, potential effects on the We find that a combination of incentives to match performance of the lease market, and a greater adminis- catches with leasing quota and limits on the level each trative burden. If two species in a multispecies complex mechanism can be used provides sufficient flexibility to the have TACs that are out of balance with average catch quota owner without fishery managers incurring excessive ratios, the non-trading instruments might enable fishers to levels of overexploitation risk. In most circumstances, more fully utilize the TAC of the species that would flexibility mechanisms are used at the margin and represent otherwise have been constrained by the TAC of the jointly a small percent of the TAC. There are designs where abuses caught species. Flexibility mechanisms can, therefore, are more likely, especially if managers do not take into increase the value generated by the multispecies complex, account the incentives provided by the entire suite of but they also can increase the risk of overexploitation. options available to the quota owner. Contrary to some Achieving the right balance between flexibility, over- opinions, we believe that the performance of these exploitation risk, and administrative simplicity is critical programs is evidence that it is possible to implement IFQ for the profitability and sustainability of multispecies programs for multispecies fisheries and that they can be fisheries. profitable and sustainable. Over the years, fishery scientists, policy analysts, The paper is organized as follows. Next, we provide academics, managers, and fishermen have debated whether background information on the multispecies IFQ systems IFQs are appropriate for multispecies fisheries (e.g., [6–8]). in New Zealand, Australia, Iceland, and Canada. We then During this time, fishery managers and governments define and analyze the catch-quota balancing mechanisms around the world have gained considerable on-the- used in the different systems. A discussion on our findings ground-experience with multispecies IFQ programs. The follows, with a focus on how each of the mechanisms fits objective of this paper is to document, assess, and compare into the design of each system, potential issues that arise the experiences with catch-quota balancing mechanisms in when instruments are used simultaneously, and the balance Iceland, New Zealand, Australia, and Canada. Analysis of between providing incentives and limiting the use of the the flexibility mechanisms is timely and relevant for mechanisms. We conclude by highlighting issues that arise managers currently designing multispecies IFQ programs, in the design of catch-quota balancing mechanisms. including those in the Gulf of Alaska, Gulf of Mexico, and along the West Coast of the United States (Washington, 2. Background Oregon, and California). While other papers provide qualitative discussions of For each of the five programs, we provide selective catch-quota balancing mechanisms used in specific multi- background information on the overall structure of the species IFQ fisheries [4,9–14] or of general issues with management program, such as species and gear included, multispecies IFQ systems [8], we evaluate the effectiveness the setting of the total allowable catches, and the systems of the methods for balancing catches against quotas using put in place to monitor catches. This discussion is not qualitative and quantitative data. We also pay particular meant to be comprehensive; rather, we focus on the attention to how and why these policies might have information relevant to understanding the performance changed over time in response to experiences in the of the catch-balancing mechanisms. Readers interested in fisheries or changing conditions and needs. Data on the more information on the programs should consult the use of these mechanisms (up to now absent in the review articles listed in the reference list. literature) helps to put the use of each mechanism into Since their inception, each of the programs has evolved perspective. Quantitative analysis also reveals the prefer- and adapted to new information on the ecology, econom- ences of the quota owners for the different types of ics, and social implications of the program, but the goal to mechanisms, as all of the programs have multiple options. create a profitable and sustainable fishing industry remains Our methodology consists of reviews of available the same. literature; interviews with fishery managers, industry representatives, and quota brokers; and compilation and 2.1. New Zealand quota management system (QMS) analysis of data on the use of catch-quota balancing mechanisms. In particular, we analyze information on The New Zealand QMS had its origins in the enterprise retrospective balancing arrangements, quota markets, allocation system, which created company-held quotas for cross-species exchanges, rates of quota rollover, catch nine companies for seven deepwater stocks in 1983.3 In surrender and discarding provisions, and deemed value 1986, the QMS was implemented, creating allocations for payments. Because the types of policies used and the 17 inshore species and the 9 offshore species. The majority information available to assess them differ greatly across the systems, our assessment includes a mixture of 3For further history and institutional detail on New Zealand fisheries quantitative indicators, such as how actively various management, see [9,15,16]. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 3 of the quota was allocated free of charge and based on of quota stock (a limit in each management area at 10 catch histories. An expansion of the QMS began in 1998 percent). Maori (aboriginals) own more than 40 percent of and, as of 2004, there were 93 species included, with a goal the total quota (levels vary by fish stock) through companies of including all living marine resources (including inverte- they own collectively and quota owned by individual iwi brates and some seaweeds but not marine mammals) that (tribes). Much of this quota ownership resulted from are commercially valuable or where sustainability concerns companies and quota purchased by the government and could arise as a result of fishing [17].4 transferred to Maori as a settlement of Maori claims to For each fish species managed under the QMS, New fishery resources. Maori are allocated 20 percent of quota for Zealand’s exclusive economic zone is divided up into a all fish stocks introduced to the QMS after 1992. number of quota management areas, creating a total of 550 Monitoring of catches and quota holdings occurs fishing quota markets as of 2004. The TAC is set annually through a dual reporting system that requires fishers and for each species in each management area.5 Fisheries fish purchasers to fill out forms matching catches to fishers’ legislation requires individual fish stocks to be maintained permits. For most small vessels and fish purchasers, catch- at or above a level capable of producing maximum effort-landing returns are due the 15th day of the month sustainable yield (MSY).6 following the catch. For large trawl vessels, the trawl- Most TACs are not changed in response to overcatch or catch-effort-processing-return must be submitted within undercatch situations, and many remain constant from 7 days after the end of a trip. FishServe, a private year to year. In some cases, this has lead to TAC overruns company, processes all of these forms under contract for persisting for many years. If overcatch results in a the New Zealand Ministry of Fisheries. Observers and depletion of the stock, it could result in a reduction of vessel-monitoring systems are not comprehensive but are the TAC, but this stems from management advice that a required in some cases, particularly in fisheries with marine reduction is appropriate rather than an automatic adjust- mammal interactions and on vessels participating in ment. Many fish stocks (especially those of low value) do international fisheries, such as Patagonian toothfish. When not have formal stock assessments [9], but TACs must be observers are required, costs are distributed across the fleet set for allocated species to administer the QMS. through cost recovery levies. Quota shares originally were issued as fixed annual tonnages, which required the Crown to operate in the 2.2. Iceland IFQ system market to change the TAC. This proved too costly, and in 1990, quota shares were redefined as a share of the TAC. In More than in most other countries, the Icelandic fishing 2001, managers began issuing annual catch entitlements industry is a major direct and indirect contributor to the (ACE), which is a right to harvest a specific quantity of fish country’s gross domestic product, with estimates of its in a given year that is separate from long-term quota and is contribution as high as 45 percent [18]. Furthermore, the determined by multiplying a share and the TAC as a means industry is important for trade and employment, and in to simplify leasing or temporary trades. A regularly many remote communities it is single largest employer. As updated registry of quota and ACE holdings facilitates such, fishery issues and policies have far-ranging implica- transfers that can be made online. tions; therefore, it comes as no surprise that Iceland has Species aggregation limits on quota ownership, which cap been at the forefront of rationalizing its fisheries. The the amount of quota an entity may own of a combined TAC impetus for rationalization, as in other settings, came out of a species across all management areas, have changed over of crises, first in the herring fisheries in the early 1970s, time. Current caps range from 45 percent for hake, hoki, and followed by the demersal fisheries (i.e., cod, haddock, orange roughy to 20 percent for paua and bluenose. Spiny saithe, redfish, Greenland halibut, plaice, catfish, and lobster is the only species subject to a limit on the ownership witch) in the mid-1980s. In 1990, the Fisheries Manage- ment Act made permanent the demersal IFQ systems that 7 4The QMS primarily relies on output controls to manage fisheries, but a had existed in some form since the early 1980s. variety of other regulations are used, including closed areas, gear Most of the major commercial stocks (25 species) are restrictions, and minimum size limits. There is relatively little use of input under IFQ management, and together they account for controls and no direct restriction of the number of fishing vessels or effort. more than 97 percent of the commercial value. TAC levels, 5 An allowance is made within the TAC for non-commercial use— at least for the most important species, are determined each customary recreational fishing and other sources of fishing-related year by the Ministry of Fisheries based on recommenda- mortality—with the remaining portion allocated as the total allowable 8 commercial catch. For consistency, in this paper we will refer to the total tions from the Marine Research Institute. Recently, the allowable commercial catch as the total allowable catch. 6Although Section 14 of the Fisheries Act of 1996 provides some 7Originally, vessels under 10 GRT where not included, but they were flexibility, allowing the Minister of Fisheries to deliberately set a total brought into the IFQ system under the 1990 legislation. Vessels under 6 allowable catch that may result in the stock size falling below Bmsy in the GRT have only recently been included in the IFQ program. interest of increasing the value generated by a multispecies complex as 8The Marine Research Institute uses logbooks to estimate catch per unit long as viability is not threatened, the requirements for applying this of effort by vessel classes and landing reports to help with stock exception are substantial and the minister has never exercised authority assessments, where data are gathered on age, length, height, maturity, under it. and sex. ARTICLE IN PRESS 4 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] ministry has followed the institute’s recommendations fairly target 20 quota species (or species groups) using otter trawl closely [19]. Since 1995, the ministry has adhered to a catch and Danish seine. The estimated gross value of production control rule that generally sets cod TACs at 25 percent of of the SETF for 2003–2004 was $54 million [22], making it the fishable biomass, which naturally changes over time.9 Australia’s third most valuable commonwealth fishery. Setting the TAC as a fixed percent of biomass has focused The use of IFQs for the SETF was adopted gradually discussions on the estimate of fishable biomass, removing beginning with the introduction of IFQs for gemfish and the TAC rule from controversy. According to fishery then orange roughy between 1988 and 1990. In 1992, a managers the rule automatically incorporates overages and number of other scalefish species were brought under IFQ underages into the annual TAC setting process. management, bringing the total to 16 species [25]. A large As with other IFQ systems, each vessel was allocated number of other ‘‘bycatch’’ species caught in the SETF gratis a permanent share of the TAC based on past catch remain outside of the system, with catch constrained histories. Each year, the tonnage available to a quota holder primarily by input controls.14 In response to increased is their ACE. Current limits on quota ownership are 12 targeting, some new species are being introduced into the percent for cod; 20 percent for haddock, saithe and quota management system (e.g., deepwater sharks and a Greenland halibut; and 35 percent for redfish. An additional basket quota for a number of species, including smooth cap prohibits any entity from holding more than 12 percent dory, ribaldo, oreos, and alfonsino), with others likely to of the value of the combined quota shares for all IFQ stocks. be added in the future (Towers, personal communication, Multiple government agencies monitor and enforce the 12 May 2005). IFQ regime. The Fisheries Directorate issues commercial Most of the SETF IFQ species are managed as one fishing permits, allocates catch quotas to Icelandic fishing stock, but gemfish are managed as two separate stocks and vessels, tracks quota transfers between vessels, and checks orange roughy as four. Each stock has a separate TAC and that vessels do not fish in excess of their quotas. Licensed quota shares to reconcile against catch. Quota shares operators, hired by port authorities, weigh and record always have provided a perpetual right15 to a share of the catch, transmitting catch data to the directorate twice daily total allowable catch rather than as a fixed quantity. IFQs by computer.10 While at sea, vessels can be boarded by the are associated with particular permits that specify the Coast Guard to monitor catches and fishing gear.11 With vessel and gear. Quotas are transferable both through sale due cause, the Directorate of Fisheries can place inspectors and leasing, but the Australian Fishery Management aboard vessels who monitor catch composition, handling Authority (AFMA) must approve transfers, and only methods, and equipment. licensed vessels can fish the quota. Leasing across sectors/ The Icelandic IFQ system places significant emphasis on gears has been allowed for most species since 1998. balancing economic efficiency, ecological sustainability, The 1991 Fishery Management Act is the primary fishery and social objectives. Trade-offs across these dimensions legislation, and it sets forth an objective of ‘‘maximizing have likely constrained efficiency gains. At the same time, economic efficiency in the exploitation of fisheries re- these rules have been attempts to preserve employment, sources.’’ At the same time, the act dictates that the particularly in areas where the fishing industry is the largest exploitation of fisheries be ‘‘conducted in a manner employer. Any type of assessment of the Icelandic system consistent with the principles of ecologically sustainable cannot ignore these often competing interests.12 development and the exercise of the precautionary principle.’’ To date, TACs for primary target stocks have been set using single-species assessments, while TACs for 2.3. Australia Southeast Trawl Fishery (SETF) some stocks that are primarily taken as incidental catch are generally set at levels that accommodate historical catch Established in 1915, the SETF is one of Australia’s 16 13 levels. oldest commercial fisheries. Participants in the fishery Monitoring requirements in the SETF vary by fishery and state. Logbooks have been mandatory for trawl and 9The rule also states that the resulting TAC cannot be below 155,000 tons. In 2000, a further clause was added to the catch rule for cod that states that the total TAC should not vary by more than 14There is a limit on the number of boats that operate in each sector, as 30,000 MT from one fishing year to the next. well as limits on mesh size and the amount of fishing gear that can be used. 10If Icelandic fishing vessels sail directly from the fisheries to markets in 15The legal nature of quota rights has changed over time. Quota rights Europe, the catches are monitored through sales records that are in the SEFT have been issued annually as annual renewable permits since transmitted from the importing country to the Directorate of Fisheries 1998 and the law does not ensure the perpetuity of the right. This will (http://www.fisheries.is/managem/enforcem.htm). change when statutory fishing rights are issued under the new plans in 11In addition to the IFQ system, fisheries continue to be subject to other 2005. management measures, such as closed nursery and spawning areas, gear- 16A project currently underway is exploring ecosystem-based manage- area restrictions, and minimum-size requirements imposed via mesh size ment strategies for setting TACs, including a system of companion TACs regulations. that would set a group of individual TACs based on the relative 12For more information on the Icelandic Fishery management system, sustainable harvest of the most-at-risk species and a system of multi-year see [19–21,2]. TACs (and quotas) intended to accommodate uncertainty by allowing 13For more information on the history and management system for the increased retention in years of high abundance and reduce effort in years SETF, see [22–24]. of low abundance. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 5

Danish seine fishermen since 1985. Prior to the introduc- bycatch limits. Certain IVQ species and areas can be closed tion of the trawl IFQ system in 1992, data analyses and to bottom trawlers due to concerns that arise with regard targeted validation studies indicated most (more than 80 to non-IVQ species. IVQ species are a large share of the percent) logbook data to be of good quality [24]. Since that harvest and total value from West Coast Canadian time, logbook data quality is thought to have declined due fisheries. to underreporting of catches and misreporting of catch The Minister of Fisheries and Oceans sets TACs based location [26].17 on scientific advice from the public and government When the catch is landed, the fisher is required to officials. This body bases its recommendations on stock complete a form detailing the weight of each species assessments from the Department of Fisheries and Oceans caught—a copy of which is forwarded to AFMA.18 (DFO) and includes a precautionary buffer that is based on Historically, observer coverage in the SETF is relatively the life history traits of the species.21 The groundfish trawl low, but the SETF Integrated Scientific Monitoring TAC is divided into three different quotas: vessel owner Program, which began in 2001, has resulted in increases quota (80 percent), groundfish development quota (10 [27]. AFMA funds the program, with 80 percent cost- percent), and code of conduct quota (10 percent). The recovery from industry. The principal objectives of the initial allocation of quota to vessels was based 70 percent program are to collect information on the composition of on catch history and 30 percent on vessel length. the retained and discarded catches and the size and age Groundfish development quota is allocated to vessels composition of the quota species landed (including those of based on social objectives achieved through joint proposals the non-trawl sector). These data are used to monitor the from vessel owners and processors. The code of conduct fisheries and for stock assessments. quota is intended to encourage the fair and equitable treatment of crewmembers. Both of these special programs are allocated at the minister’s discretion based on 2.4. British Columbia trawl individual vessel quota system recommendations of a group of industry, community, and provincial government representatives. The commercial groundfish trawl fishery on the Pacific Monitoring and enforcement in the IFQ system is coast of Canada originated in the 1940s. Beginning in 1976, facilitated by 100 percent at-sea observer coverage and a series of limitations were implemented, including a dockside monitoring.22 The DFO contracts this work limited entry license system, the establishment of TACs, to a private company (Archipelago Marine Research and a collection of other input and output controls. After a Limited) that is responsible for transmitting catch informa- closure of the fishery in 1995, due to concerns regarding tion to DFO within 24 h after it is landed. At-sea observers TAC overages, discards, and stock management, a record towing location and time, record discards consultation process resulted in the implementation in and estimate mortality based on towing duration and 1997 of the Individual Vessel Quota (IVQ) system for the 19 species-specific mortality rates, examine and measure groundfish trawl fishery. An IVQ is a privilege to a share fishing gear, verify the weight and species of fish caught of the TAC for a period of one to nine years that is and retained, and conduct biological sampling. Industry revocable at any time at the discretion of the Minister of 20 pays for two-thirds of the cost of observers (CA$300 per Fisheries and Oceans. day for an at-sea observer) (Mc Elderry, personal commu- Currently, 31 species across 8 species management areas, nication, 11 May 2004) and the entire cost of the port identified according to stock distribution, are included in monitoring. the IVQ, resulting in 56 area-specific stocks. Approxi- mately 50 other species are caught in conjunction with the IVQ species and are not subject to TAC management. An 2.5. Nova Scotia mobile gear groundfish IFQ ‘‘other rockfish’’ category is, however, managed through In the 1970s and 1980s, the inshore mobile gear 17Among other things, these logbook inaccuracies have led to the groundfish fishery in the Scotia-Fundy region of Canada introduction of compulsory satellite transponders for the orange roughy was regulated by fleet quotas, limited entry, area closures, fleet operating off of New South Wales. and various input restrictions (including vessel length and 18 For some areas and gears, fishing operators are required to call-in to gear restrictions). Overcapacity concerns and stock declines AFMA one to four hours before arriving in port with information on led to early closures of some areas in 1989 and to the catch and port destination. In addition, AFMA is working cooperatively 23 with state/territory fisheries compliance organizations to implement a development of the IFQ program. Since 1991, the IFQ system to require records at all points in the marketing chain. The system will enable product movements to be tracked beyond the first receiver and 21Overages and underages are not explicitly incorporated into the auditing of products at all stages of the market. annual TACs but are indirectly accounted for through stock assessments. 19In addition to the IVQ allocations, fishing in the IVQ fishery is Only sablefish stock assessments are carried out each year; other IVQ regulated by gear and vessel-length restrictions, prohibited species species are assessed every 3rd or 4th year. regulations, species and area closures, area-specific quotas, species-specific 22Complete observer coverage was instituted before the IVQ program in caps on individual and vessel holdings of quota, and license limitation. response to the crisis in 1995. 20For more information on the British Columbia groundfish fishery, see 23For more information on the Scotia–Fundy inshore mobile gear [5,28,29]. groundfish fishery, see [4,30]. ARTICLE IN PRESS 6 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] program has governed directed harvests of cod, haddock, suite of mechanisms for fishermen—all with the goal of pollock, various flatfish, and redfish.24 helping address the problem of catch balancing. In An aggregation limit prohibits any quota holder from designing mechanisms, managers try to encourage selective holding more than 2 percent of the TAC of any species for fishing and discourage fishing for species without adequate a specific area. Processors were not allowed to own vessels quota as well as ensure that fishermen land and report or quota at the time of the initial allocation. Soon catch that exceed their holdings. thereafter, vessel owners bought processing facilities and In Table 1, we list the flexibility mechanisms encountered were allowed to keep the quota they were allocated in our survey of the different programs. In the analysis that initially. follows, we describe each of the mechanisms, the scope and Under the current management, TACs are set for fish limitations on their usage, changes in the mechanisms over stocks, which are species–area combinations. The Minister time, and insights into their performance from industry of Fisheries and Oceans sets TACs based on recommenda- and government representatives. Where data are available, tions from the DFO and the regional advisory panel. we illustrate the use of the mechanisms in terms of the Unlike in the British Columbia fishery, TACs are set to volume of quota covered, which is measured as percent of achieve a biomass that yields 10 percent less than MSY. the TAC, percent of vessels using the instrument, and Four stock assessments are carried out each year, with the relative cost measured as percent of the annual profits for goal that each stock is assessed every 2–4 years. Overruns the industry.25 are subtracted from the following year’s TAC and the Use rates provide information on each quota owner’s fleet’s allocation. For example, if the mobile fleet goes over preferences for a particular instrument.26 Measuring its allocation in any fish stock, then its allocation will go volume in terms of percentage of the TAC also provides down next year. insights into the potential aggregate TAC overage or Portions of the various TACs are allocated to the inshore underage in that year due to use of the instrument. It is mobile gear fleet as fleet quotas, which are in turn allocated important to point out, however, that there is not as IFQ among the 327 licenses in the program. Most fleet necessarily a one-to-one mapping between the volume of quotas are for fish stocks. If the fleet quota is reached for a use and ratio of the aggregate catch to the TAC. Suppose, fish stock, the area is closed to the fleet. In this way, any for example, that there are 100 quota owners, each of quota species for which the fleet quota has been fully which has the same 10-ton allocation of ACE. If half the caught constrains the catch of other species. quota owners’ carry-forward 10 percent of their allocation The DFO introduced a Dockside Monitoring Program and half use deemed values to cover overages of 10 percent, in 1991 to verify and report landings on a timely basis. then the TAC is not exceeded.27 Obviously, other examples Recent discrepancies between monitored and unmonitored can be constructed where there is a one-to-one mapping. landings data led to a goal of increasing dockside monitoring to 100 percent. Observer coverage requirements vary by gear. For example, mobile gear vessels 65–100 feet 3.1. Quota markets are required to carry industry-funded observers at a rate of 10–20 percent in some areas and 10 percent in other areas. When quota owners have portfolios of annual quota (or In other sectors, observers are required when using certain ACE) that, on average, balance with expected catch gear combinations. In the generalist fleet, industry-funded composition, then trading of ACE between fishermen observer coverage is required at a rate based on a minimum should enable reallocations over the year such that ACE of one sea day per 100 ton of quota. balances against catch in the aggregate. Markets for ACE are, therefore, an important mechanism for

3. Catch-quota balancing mechanisms 25Limited data are available for some of the fisheries. In each case, data are presented to the extent available. 26 Across the five programs, solutions to balancing catches One caveat in mapping use rates onto preferences of quota owners is lack of information on why fishermen use a mechanism. An interesting with quota focus on introducing flexibility at the individual research project would be to collect the necessary data to better level. How much flexibility is needed depends on how understand the behavioral factors that drive quota owners to utilize closely initial allocations match catch histories, how certain mechanisms over the course of the year, such as the reasons why aligned the TACs are with species catch rates, and how leasing occurs (see footnote 43). 27 much control operators have in modifying their fishing to This example illustrates our point, but a natural question to ask is why would the quota not owners carrying forward quota sell to those using the match catches with quota/ACE holdings. What is clear, deemed value system. If the deemed value rates were set optimally, however, is that each of the programs has introduced a transaction costs are zero, and fishermen were risk neutral, then we would expect these trades to occur. In real-world IFQ markets, none of these 24In some areas, quota are allocated for a single species, with no directed conditions hold. In many cases, fishermen might prefer to carry-forward fishing for other species. Directed fishing of some other species harvested quota rather than sell it, because they want to make sure that next year by this fleet are governed by a competitive, limited entry management. they will have enough quota or they might think the price of fish will be These fisheries that are not managed with multispecies IFQs are beyond higher next year. The former reason is more likely when there are stiff the scope of this paper. penalties for going over your holdings. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 7

Table 1 Flexibility mechanisms for catch-quota balancing

Instrument Definition

Permanent transfer Transfer of a share of the TAC in perpetuity Temporary transfer Transfer of a annual catch entitlement (ACE). Similar to leasing Carry-forward Ability to ‘‘bank’’ any unused ACE to be used in the next fishing year Carry-backward Ability to borrow a portion of next year’s expected allocation of ACE to use in this fishing year Discarding Fish that are not retained for market; usually discarded at sea Deemed value A per unit fee that is charged to fishermen who land catch in excess of holdings Species equivalence Ability to covert ACE of one species into ACE of another at a pre-specified conversion ratio Retrospective balancing Period of time allotted fishermen to match catches with quota holdings Quota baskets Grouping species into one aggregate quota bundle where the TAC is for all the species combined Fishing-on-behalf-of A fishermen can agree to cover his catch with the ACE of another arrangements Surrender Provision allowing fishermen to land fish that do not count against their ACE by surrendering it to the government

accommodating imbalances between fishermen’s catches quota market participation rates increased over time, with and their annual quota. more than 75 percent of the quota owners either buying or Each of the programs allows the sale of the permanent selling in the market by 1998. Connor and Alden [23] also rights and lease of annual quota or sale of the ACE, but report high quota market participation rates for the most do so under certain conditions. In Iceland, the sale of Australian SETF. quota was tied to the vessel before 1991 [21], and currently Iceland and New Zealand both have established central there are restrictions on the amount of ACE each owner trading exchanges. New Zealand managers have experi- can sell each year and use-it-or-lose-it restrictions. Use-it- mented with two centralized quota-trading exchanges over or-lose-it restrictions are intended to prevent ‘‘armchair’’ time. The first, created by the New Zealand Legislature fishermen that own and only lease out their quota. There alongside the QMS [31], included fish brokers and a trading are often ways to work around these restrictions, however, information exchange but never materialized and was such as fishing-on-behalf-of arrangements or contractual closed down shortly after the QMS system was implemen- arrangements for a multiple-year lease. British Columbia, ted. In 2004, an online auction system for annual quota (or which recently amended its program to allow leasing (it ACE) (www.acetrader.maori.nz) was created. The system had unofficially existed before), plans to reduce gradually has achieved limited success to date. the amount that can be leased each year to maintain an The primary purpose of Iceland’s trading exchange was owner–operator fleet. New Zealand, Nova Scotia, and to convey timely information on the value of fishing quota Australia, on the other hand, do not restrict quota to be used by crew and non-quota owners to negotiate ownership to active vessel operators.28 contracts and payments. The exchange was abolished after Other common restrictions are allowing trades only 2 years because it was partly redundant with a separate within a pre-specified market (area–species combinations), system that monitors the compensation of crew. limits on the share of quota ownership, and requirements Fig. 1 illustrates the annual volume of temporary that trading partners must be members of the same fleet transfers as a percentage of the TAC for the median fish (i.e., gear and vessel type). For example, in Nova Scotia in- stock in each system.29 We find that in a typical year, season transfers are restricted to members of the same gear between 30 and 50 percent of shares of the median stock sector, while transfers in the off-season to balance holdings are transferred temporarily. There also is substantial and catches are permitted more broadly. In Iceland, variation from year-to-year, and this likely is due to regional trades must be pre-approved to limit concentra- changing economic, ecological, and oceanographic condi- tion of the quota in certain areas of the country. tions from 1 year to the next. In Iceland, managers Each fishery examined has an active market for the attribute the dramatic drop in leasing in 2000 to a rule temporary transfer and sale of the permanent right (or requiring all leases to be registered on the central exchange. privilege to catch fish out into the foreseeable future). In almost all systems, quota brokers facilitate trades, taking 29Data on the volume of leases for the SETF was reported in Kompus commissions of three to six percent. Large quota owners in and Che [32], and TAC data is from Smith and Wayte [24]. The Icelandic New Zealand employ quota managers. Fishery associa- Fisheries Directorate provided data for Iceland. We utilize the multi- tions also facilitate trades. Newell et al. [3] found that species subset of the lease transaction data compiled by Newell et al. [3]. The New Zealand Ministry of Fisheries provided data on the deemed value use rates and revenues and the bycatch trade-off scheme. In SETF, 28In addition to leasing, Iceland and New Zealand also permit ‘‘fishing the TAC used in the calculations is the actual TAC, which differs from the on behalf of other’’ relationships, under which one person can fish the agreed TAC due to netting-out overages and underages from the previous quota of another without engaging in a formal transfer. year (see [23] for a discussion of the different TACs). ARTICLE IN PRESS 8 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]]

fishermen may not solely be using leasing to resolve catch- 60 matching issues. The ability of participants to discard overages and to carry-forward as much as 20 percent of 50 their allocation for use in the following year also may limit the need for temporary transfers to cover overages in the 40 fishery. In the other fisheries, managers reported that the

Percent of TAC 30 markets are liquid, with varying amounts of average annual transactions. For instance, in Nova Scotia there are approximately 1100 temporary transfers between the 20 300 licensed vessel owners each year. Quota transactions 1990 1995 2000 2005 are facilitated by participation in the Mobile Gear Fishing Year New Zealand Iceland Association and/or the Fixed Gear Fishing Association South East Australia (McMaster, personal communication, 20 April 2005). According to British Columbia groundfish trawl managers, Fig. 1. Median percent of the TAC leased each year. Note: New Zealand there are approximately 2500 transfers of quota each year lease transaction data are from Newell et al. [3]. Our results differ slightly among its 142 owners, with seasonal fluctuations in trade from those presented in Newell et al. [3] because we focus specifically on volume within each of those years (Ackerman, personal multispecies fisheries (shellfish fisheries are not included). The New communication, 20 April 2005).31 Zealand data also represent market transactions between different Consolidated holdings, which may be objectionable to economic entities (e.g., trading between subsidiaries of one company or family members are omitted). Neither the data from Iceland nor Southeast some for distributional reasons, can facilitate catch-quota Australia has been subject to the same data-filtering process. This would matching. For example, some New Zealand processors imply that relative to the other systems, we would expect New Zealand to hold large allocations that are leased out to fishing be lower, everything else being equal. TAC: total allowable catch. fleets, with fishermen leasing out exactly what they need to cover their landings. If distributional concerns are an issue, coordinated quota management (through The recent increase is then explained by the abolishment of entities such as fishermen cooperatives) is another possible that exchange. This example illustrates the potential effects means to address catch-quota matching issues. Quota- that administrative rules can have on market performance. owner cooperatives also developed under IFQ manage- Overall, the large volume of temporary transfers illustrates ment in New Zealand with very little government that leasing is an important tool for quota owners.30 intervention. We focus on temporary transfers rather than permanent In theory, rules such as caps on ownership, annual limits ones because temporary transfers are the preferred means on leasing, use-it-or-lose-it restrictions, and limiting of meeting short-term mismatches between catches and transfers by region or fleet can constrain individual holdings. Of course, over the long-term, firms will learn flexibility in balancing catches with quota holdings. and acquire a portfolio of quota that better matches their However, the fishery managers surveyed in our study do expected catches. Therefore, permanent transfers are an not seem to think that this is a problem, at least not in the important part of the solution. Overall, the volume of aggregate. permanent transfers is much lower than leases; for New Zealand, the median stock has seen about an average of six 3.2. Rollover allowances percent sales volume between 1986 and 2000 [3]. An expert on the SETF, Richey (personal communica- Rollover allowances permit operators either to carry- tion, 29 November 2004), suggests that the South East forward unused quota for use in the following year or Trawl quota market, though primarily an informal one, is carry-back or deduct from the next year’s allocation an effective at facilitating trading. Nevertheless, there are overharvest of the current quota. Each of the programs indications that quota is not always getting to those who allow some form of rollover, but none allow the quota to can use it. Other experts note that for some species, the availability of quota becomes constrained when the catch 31These transfers are categorized as permanent transfers, but most are gets up around 80 percent of the TAC (Knuckey, personal likely for short-term leasing purposes since, until recently, leasing was not officially allowed in British Columbia. Some of the short-term leasing that communication, 9 December 2004). The relatively tight takes place at the end of the season in British Columbia is not to cover market at the end of the season as catches get close to the overages but instead to ensure that quota left at the end of the year is cap, which is normal in a rationed market, suggests that carried forward. For example, if an individual has 35 percent of his quota for a particular species left at the end of the year, 30 percent of that will automatically be rolled over to next year. To avoid the loss of the 30According to brokers in British Columbia, the first quarter of the remaining 5 percent, a fisherman may sell it to someone who has not yet fishing year is the most active time for trading, as vessels are getting their maximized his rollover allowance and can roll over his 5 percent. The portfolios of quota ready. Newell et al. [3] report a similar result for New fisherman will then sell the amount back to the original quota holder the Zealand. following year. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 9 be carried over multiple years, which would permit the Likewise, Connor and Alden [23] found that the use of accumulation of banked quota for use in future periods. carry-forward provisions tended to decline in general as the Carry-forward allowances vary across programs. Iceland SETF IFQ system matured, particularly for stocks such as and the SETF32 both allow persons to carry-forward 20 ling where catches generally were close to the TAC. percent of their annual quota. For SETF, the carry- However, for a number of stocks, aggregate catches are forward amount permitted increased from 10 percent in chronically well below the TAC and many fishermen 1994. New Zealand allows 10 percent carry-forward. continue to carry-forward unused quota from 1 year to the Generally, British Columbia allows up to 30 percent of a next. There appears to be much less use of carry-back person’s quota to be carried forward, but British Columbia provisions. managers can reduce the percentage of, or even eliminate, While there is not much hard evidence, it appears that the carry-forward for conservation reasons on an annual the same patterns found in the Icelandic and SETF hold basis. Since 2001, New Zealand operators have borne the for the British Columbia fishery and New Zealand. In New risk that all quota carried forward will be forfeited if the Zealand, the lack of resistance to canceling the allowed TAC is reduced the following year. British Columbia also overage amounts in 2001 is evidence that this mechanism is reducing its carry-forward allowance to reduce the was not considered critical to catch balancing. One reason possibility of TAC overruns. for this might be the potential redundancy with New British Columbia and SETF have symmetrical carry- Zealand’s deemed value system, which is described below. forward and carry-back percentages, while Iceland limits One potential reason for lower usage rates of the overage its carry-back to five percent over the annual quota (or provisions both in terms of the number of vessels and the ACE). Nova Scotia had an overage schedule that was volume is that quota owners face penalties if they exceed graduated by the amount of total overage, until a recent their overage amounts. For example, in the SETF, court decision declared the system punitive. In particular, managers can deduct from next year’s quota at a penalty overages up to 10 tons (after an allowed 1 ton overage was of 2:1 the weight of fish caught in excess of the overage accounted for) were counted at a one-to-one rate against provisions. Similarly, over-compliance is also found in the next year’s allocation. Overages of between 10 and pollution control settings where firms face pollution 20 tons were counted at a rate of two-to-one, and overages control standards and stiff penalties [33]. in excess of 20 tons were accounted for at a rate of three-to- one. After the court decision, the 1-ton allowed overage was removed and all overages are charged at a rate of one- 3.3. Deemed value payments to-one against the following year’s quota.33 In 2001, New Zealand eliminated its 10 percent overage rule that was in New Zealand is unique in its use of deemed value place since 1986, requiring overages to be covered by payments, under which quota owners are charged for acquiring ACE or paying a deemed value. landing fish for which they do not have sufficient annual A common pattern across the systems is that the volume quota (or ACE). Deemed value rates generally are set to and use of carry-forward provisions is greater than carry- discourage discarding at sea but at the same time to not encourage targeting of fish for which the fisherman does back provisions. Fig. 2 illustrates the median percentage of 34 quota owners using the mechanism and the volume not have quota. The deemed value system creates a dual measured as a percentage of the TAC for the median fish price–quantity management regime under which both the stock across all Icelandic ITQ fish stocks. We find that TAC for allocated quota and deemed value prices for about 60 percent of the vessels carry-forward quota in the individual overharvests manage total catch. Theoretically, median fishery, corresponding to about 10 percent of the a fisherman in New Zealand could fish throughout the year without balancing any of his catch with ACE as long as he median TAC. While the percentage of vessels carrying back 35 to cover overages is around 10 percent, the tonnage carried pays the deemed value. Obviously, the deemed value rate back is a very small percentage of the TAC. In Iceland, 34For example, deemed values are set for each QMS fish stock, with Atlantic cod had the greatest percentage of quota owners 2004–2005 per kilogram values ranging from as low as NZ$0.01/kg for carrying back quota, and in one year, there was little frostfish in area 2 to a high of NZ$105/kg for spiny rock lobster in area 8. difference between the percentage carrying back and The law requires the minister to set deemed values with the primary carrying forward. The temporal variation in Fig. 2 likely objective of providing incentives for fishers to cover catch with ACE. In is driven by changes in stock abundance due to environ- practice, annual deemed values are adjusted as some percentage of ex- vessel prices. However, deemed values sometimes are set above ex-vessel mental factors (changes in water temperatures, etc.), world prices for some high-value target species and for overcaught stocks in markets for fish, and prices of inputs. response to TACs being exceeded. 35This holds only so long as no overfishing threshold has been imposed 32In 2003, fishers in the SETF were not allowed to be in an over-quota for any species found in the area the person is fishing. If an overfishing situation at any time (i.e., to land catch for which they do not own quota) threshold is imposed on a QMS stock, no fishery can continue to fish for some species, and the same is true for other species in 2004. However, where it is feasible to catch that species/stock if the catch they have landed this is a temporary measure related to a legal change in the catch exceeds their ACE holdings by a given percentage. If they have no ACE entitlement and presumably carry-backs will be allowed in future. for that species in that QMA, they cannot fish in that QMA. However, 33Overages that are deemed excessive also can be prosecuted. overfishing thresholds have rarely been imposed. ARTICLE IN PRESS 10 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]]

80 15

60 10

40

5 Percent of TAC 20

Percent of Vessels Owning Quota 0 0 1990 1995 2000 2005 1990 1995 2000 2005 year year Carrying-forward Carrying-back Carrying-forward % of TAC Carrying-back % ofTAC

Panel A : Median Percent of Quota Owners Panel B : Median Volume of TAC

Fig. 2. Rollover provisions in Iceland’s demersal fisheries. Note: Panel A is the median percent of quota owners using the rollover mechanisms. Panel B is the volume of carry-forward and carry-back for the median stock measured as a percent of the individual stock’s TAC. TAC: total allowable catch.

(per unit of fish landed) is an important potential deterrent illustrates the schedule, under which payments increase in for such actions. 20-percent increments for each 20 percent by which a Fig. 3 illustrates the percentage of the fish stock’s TAC person’s catch exceeds ACE holdings. Differential deemed that was covered by deemed value payments for the 25th, values are not charged on some low-value stocks for which median, and 75th quartile stocks. While the percent of the there is inadequate stock assessment for regulators to have median fish stock’s TAC covered by deemed value confidence that the TAC has been set appropriately. The payments remained steady at approximately one percent, differential deemed value system is designed to provide the upper quartile averaged more than five percent in most stronger incentives to the individuals who are most years. Between 1990 and 2004, the total annual deemed responsible for TAC overruns. For certain stocks, the value outlays by the industry ranged from approximately differential deemed value system increased the level of the $5–10 million in New Zealand 2000 dollars. These outlays outlays by the industry. are a small percentage of the annual profits in each fish In 2003, a new ACE trading service was created by a stock, where the median percentage is about two percent.36 private company (FishTech Ltd.) with the specific aim of The revenues from the deemed value system go to the New matching individuals paying different deemed value rates Zealand Treasury’s general fund.37 with those that still had quota remaining. The gains from Fig. 3 also shows that the variation in the volume of trade are split evenly between the parties after FishTech usage across stocks has increased since 1999. One reason takes a percentage. This system attracted 12 participants in for increase is that additional fish stocks were introduced 2003 and reduced total deemed value payments by around into the system in 1999, and for many of these stocks, very $400,000. In 2004, 40 participants signed up, of which 20 little information is available for setting the TAC. Also in ended up making ACE trades, resulting in a total net 2001, the 10 percent carry-back allowance to cover reduction of deemed values around $600,000 (Howard, overages and the bycatch tradeoff scheme that allows use personal communication 12, May 2005). of quota of one species to cover catch of another in 2001 Deemed values have been particularly useful in provid- were eliminated and this reduced the mechanisms available ing flexibility for some bycatch stocks for which there is to match quota to catch. relatively little information on biological status but for The large variation in usage of deemed value payments which there are no sustainability concerns.39 Deemed across stocks and perception of the negative effects on values for these stocks are set at 60 percent of port price certain stocks because of consistent use of the deemed and in some cases much lower. There is some evidence that value compelled managers to revise the payment rate even in cases where deemed values have been set near or schedule in 2001. Under the revised system, an owner’s payments increase with use of the system.38 Table 2 (footnote continued) considered were whether responses, in terms of raising deemed values, 36Annual profits were estimated by multiplying the annual lease price of should be stronger to eliminate chronic TAC overruns, whether quota in New Zealand and the total allowable catch. differential deemed values should be applied as a default policy, and 37When employing a system of deemed values, careful consideration whether a portion of the revenue from the deemed values should be should be given to the recipient of the funds to ensure that there is no returned to quota owners in some form. potential conflict of interest. 39An interesting research question is to adapt the single species analysis 38In New Zealand, a joint working group that included members of the investigating the use of quantity or price instruments for fisheries [43,34] to Ministry of Fisheries, Treasury, and the industry completed a compre- the multi-species context with target and bycatch stocks with multiple hensive review of the deemed value system in 2005. Among the issues types of uncertainties. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 11

25 10 20

15

5 10 Percent of TAC 5 Percent of Annual Profits

0 0 1990 1995 2000 2005 1990 1995 2000 2005 year year Median Deemed Value (tons) 75th percentile Median Deemed Value($) 75th percentile) 25th percentile 25th percentile)

Panel A : Volume as Percent of TAC Panel B : Percent of Annual Profits

Fig. 3. Usage of deemed value as percent of TAC and annual profits in New Zealand. Note: Panel A is the volume of deemed values measured as a percent of the TAC, and panel B is the dollar amounts measured as a percent of the annual average profits in the fish stock (annual profits are approximated by the annual average of the lease or ACE price). TAC: total allowable catch; ACE: annual catch entitlement.

Table 2 Differential annual deemed values in New Zealand IFQ fisheries

Individual catch as a percentage of ACE held Differential annual deemed value

100 percentoxp120 percent of ACE Basic annual deemed value 120 percentoxp140 percent of ACE 120 percent of basic annual deemed value 140 percentoxp160 percent of ACE 140 percent of basic annual deemed value 160 percentoxp180 percent of ACE 160 percent of basic annual deemed value 180 percentoxp200 percent of ACE 180 percent of basic annual deemed value x4200 percent of ACE 200 percent of basic annual deemed value

ACE: annual catch entitlement.

above ex-vessel prices, they have been used to balance holdings. According to industry sources, there are ongoing incidental catch. In these rare cases, fishermen have found discussions to remove this provision, because the percep- it worthwhile to pay the deemed value because the tion is that it is mainly used for cod. We find that between alternative would be to forgo use of the quota for the 2002 and 2004, cod was the primary species subject to this associated target species or undertake costly bycatch auction; however, the amount of cod landed under this avoidance actions.40 provision was less than one percent of the cod TAC. Iceland has an instrument that resembles deemed value Similar to Iceland, catch in excess of the overage payments, but it differs in that it only applies to catches in allowance in British Columbia may be retained, but excess of the five percent carry-back provision. In Iceland, revenues from that catch must be relinquished to the boats that land fish in excess of the five percent carry-back Canadian Groundfish Research and Conservation Society, provision must supply their catch to the local auction a non-profit organization that conducts research for the house, where the proceeds are split between the govern- benefit of the fishery. In addition, the pounds of fish caught ment (80 percent) and vessel owner (20 percent). The 20 in excess of the overage allowance are deducted from the percent that the vessel owner gets is to pay for the variable vessel’s allocation the following year. In a 7-year span, this costs of fishing, mainly crew wages. Government revenues overage forfeiture has been applied only twice (Ackerman, go to a special development fund run by the Minister of personal communication, 22 November 2004). Fisheries. The amount of quota surrendered to the auction house cannot exceed 10 percent of an owner’s total 3.4. Species quota exchanges

Species quota exchanges permit fishermen to cover catch 40This example also illustrates the need to consider joint production when setting deemed values. A fisherman can be expected to pay deemed of one species with quota of another at a pre-specified values for constraining low-value stocks to allow targeting of a high- trading ratio. For example, consider a fisherman that lands valued target stock. 10 tons of haddock over and above the amount of quota ARTICLE IN PRESS 12 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] owned, who also holds 5 tons of uncaught cod quota. If the rates between species quota. Cod equivalence rates have quota program allows an exchange of cod quota for changed over time and are calculated based on the relative haddock catch at a rate of 1 ton of cod quota to cover value of the different species.43 While Icelandic fishery 2 tons of haddock catch, the fishermen could use the 5 tons managers do not dismiss the potential for abuse of their of cod quota to cover the haddock overage. system of cod equivalents, their oversight has disclosed no A disadvantage of species exchanges (similar to deemed evidence of systematic abuse. A more comprehensive value payments) is that the aggregate catch of each species method of setting exchange rates, which considers factors is uncertain. The possibility that TACs will be exceeded such as economic rents and ecological risks, could reduce depends on the relationship of relative catches and TACs the potential for abuses, but the additional complexities of of exchangeable species. In some instances, these could such a system could pose analytical challenges and could arise from rates of exchange that create incentives for have difficulty obtaining public acceptance. fishermen to convert quota of less valuable stocks into ones Panel B of Fig. 4 illustrates the time series of the cod for more valuable stocks. Limits on the amount that can be equivalence rates in Iceland. Considering the quota converted from one species to another can inhibit such exchange rates together with the net transfers across abuses. species shows that the system has provided incentives for Iceland is the leader in using species exchanges. Under its fishermen to reduce the catch of a species. The increase in system, quota shares are put into cod equivalents or a cod the halibut exchange rate in the mid-1990s corresponds currency.41 Limits, however, constrain the conversion of with lower net conversions for that species. For example, ACE among species. Specifically, quota owners can convert by setting a rate greater than one for halibut, the Icelandic cod to other demersal species and make conversions among government could make it unprofitable to convert other the other demersal species, but demersal species other than species to halibut and profitable to convert halibut to other cod cannot be converted into cod. In addition, owners species. Such a pattern is observed when comparing the cannot convert more than five percent of their total ACE in two panels, where the increase in halibut rates corresponds ‘‘cod equivalent’’ units, and no more than two percent of with lower conversion volumes. their ACE can be converted into any one species. These Between 1990 and 2001, New Zealand included a system restrictions attempt to reduce the possibility for large similar to Iceland’s cod equivalents. The bycatch trade-off overruns of TACs in any given year. Very sophisticated scheme allowed limited trading of quota of certain species web-based catch-balancing data collection and real-time against quota of other species. Each year the program was updating of catches has helped to reduce the administra- in operation, specific bycatch and target stocks would be tion costs of the species trade-off system in Iceland. listed with the rates at which they could be traded. The Panel A in Fig. 4 shows the annual net volume of quota scheme allowed a fisherman who landed the bycatch stock converted through cod equivalents from 1991 to 2004 for for which he had insufficient quota to trade off quota for four species. Negative levels indicate that cod equivalent the target stock at a specified rate on the condition that the conversions decreased quota for the species, and positive bycatch was taken while fishing for that target species. The levels indicate that on net the species quota was increased trading ratios were specific to each bycatch and target by cod equivalent conversions. None of the species species. That is, elephant fish (area 3) could be traded at consistently had positive (or negative) conversion over one ratio with red cod (area 3) and at another with flatfish the period. Most of the annual conversions are less than 20 (area 3). Over the course of the program, 30 fish stocks percent of the TAC, but there are some anomalies with were denoted target species, 46 were denoted bycatch, and saithe and plaice.42 While the figure represents net 6 were denoted both bycatch and target. Unlike in Iceland, aggregate conversions, individual quota-owner conversions where quota could not be converted into cod, often a likely are offsetting to some degree, as one quota owners species would be classified as bycatch in one quota use of halibut quota to cover haddock catch will be offset management area and as a target species in another quota by another’s use of haddock quota to cover catch of management area. halibut. Panel C of Fig. 4 shows the aggregate percent of the Similar to the deemed value system, where the use TAC converted at the 25th quartile, median, and 75th depends on the deemed value charged for quota, the use of quartile from 1991 to 2001. Although overall conversion of the ‘‘species exchanges’’ greatly depends on the exchange quota under the bycatch trade-off scheme was relatively small, converted quota was a large portion of the TACs of 41‘‘Cod equivalent’’ refers to weight and implies the relative value of some stocks. The annual quota conversions for a select different fish species on the market and is set by a regulation every year. group of fish stocks are shown in Fig. 5 to illustrate some For each vessel having a quota for several species, the total quota may be of the variability across various stocks. An upward trend in calculated in kilograms as cod equivalents. Quota transfer between vessels, conversion is also evident, at least for some of the stocks even if the same non-cod species (e.g., saithe) is traded in the market, often for which conversion was most widely used. is measured in cod equivalents. 42In reviewing conversions, it should be noted that halibut TACs disproportionately are lower than the other TACs due to natural 43Value is defined as gross revenues, which is the product of the differences in the population sizes. expected average price of fish times the TAC. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 13

40 2.5

20 2

1.5 0 % of TAC

Rate (1=Cod) 1 -20

0.5 -40 1990 1995 2000 2005 1990 1995 2000 2005 Year Year European Plaice Greenland Halibut European Plaice Greenland Halibut Haddock Saithe (Pollock) Haddock Saithe (Pollock)

Panel A : Species Exchange in Iceland Panel B : Cod Equivalence Rates in Iceland

6

4

2

0 Percent of TAC

-2

1990 1992 1994 1996 1998 2000 year Median BCTO(tons) 75thPercentile 25th Percentile

Panel C : Species Exchange in New Zealand

Fig. 4. Species conversions in Iceland and New Zealand. Note: Panel A is the conversion of species as percent of TAC in Iceland’s species exchange system. Negative percent means the species was converted out of and into another in the aggregate, and positive means that the species was converted into on net. Panel B is the exchange rates, or ‘‘cod-equivalence’’ rates. Rates below one imply that 1 ton of cod can be converted into more than 1 ton of another species. Panel C is the conversion of species in the New Zealand BCTO scheme measured as a percent of the TAC. Negative levels imply that the species are being converted out of their quota into another species’ quota. Since the BCTO scheme developed exchange rates between species, we should not expect to see a one-to-one relationship between negative and positive levels. TAC: total allowable catch; BCTO: bycatch trade-off.

While Iceland limits the amount of quota that a of the annual process of setting exchange ratios, but abuses fisherman can convert and protects cod, its most valuable also contributed to its demise (McGregor, personal stock, by not allowing conversions to cod quota, conver- communication, 11 October 2004). sions by New Zealand fishermen were constrained only by Nova Scotia’s quota program initially included a species their target species holdings. The absence of additional exchange system similar to Iceland’s. Conversion rates limits increased the potential for abuse and the risk of among the three species (cod, haddock, and pollock) overfishing bycatch stocks. At the extreme, net conversion included in the program were predetermined based on the of target quota into both bluenose quota and elephant fish market prices. In the 1st year, conversions balanced the quota in area 3 exceeded 60 percent of their TACs in at catch of the different species without any substantial least 1 year. As Peacey [35] notes when discussing the trade- fleet quota overruns. In the 2nd year, however, conversions off scheme, ‘‘the method was biologically unsound and led to an overharvest of haddock and an underharvest of some fishers used the system to target species which they cod and pollock, leading managers to discontinue had little or no IFQ for.’’ The former manager of the the program (Hansen, DFO manager, personal commu- BCTO system, McGregor, believes that the system was nication, 19 November 2004). Similar to concerns in New ended primarily because of the administrative complexity Zealand, some commentators in Nova Scotia believe ARTICLE IN PRESS 14 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]]

3.5. Retrospective balancing 80 BNS3

BNS3 Beyond simply permitting transfers, catch-quota match- ELE3 60 ELE5 ing in many programs is facilitated by permitting a quota ELE3 ELE3 holder to balance their catches and quota holdings retro- BNS3 BNS3 spectively. 40 BNS3 STA7ELE3 The Nova Scotia program initially allowed 30 days for

ELE3 STA7 post-landing quota acquisitions. To allow greater flexibil- STA7 GUR3BNS3 ELE5 20 ELE3 ELE5 ity, the period for purchases has been extended to 45 days. ELE5 ELE3 ELE3 GUR3 In addition, a 2-month period is allowed at the end of the BNS3 GUR3STA7 GUR3 BNS3 STA7 STA7 STA7 Percent of TAC Converted in BCTO fishing season during which people have the opportunity to 0 ELE5 ELE5 STA7 cover their overages with temporary transfers. During this

0 LIN4 BAR7 LIN4 period, limitations that restrict trading within gear types FLA3BAR7 LIN4 BAR7 FLA3 LIN4 LIN4 FLA3 LIN4 FLA3 FLA3 LIN4 FLA3 BAR7RCO3 LIN4 are lifted. Limiting these transfers to the post-season is RCO3 BAR7 RCO3 FLA3 RCO3 FLA3 thought generally to preserve the distribution of the RCO3 RCO3 RCO3 BAR7 fisheries between the gear types, while facilitating the -10 RCO3 GUR8 BAR7 coverage of quota overages to prevent TAC overruns and decreasing the potential incentive to discard that might 44 BAR7 arise if few shares are available for the gear type. -20 GUR8 In New Zealand, catch must be balanced with ACE by the 15th day of the following month in which the fish were caught. If the fisherman does not do so, he must GUR8 Percent of TAC Converted in BCTO -30 pay a deemed value, which is refunded if the fisherman 1992 1994 1996 1998 2000 acquires ACE to balance the catch within 15 days of year the end of the fishing year. British Columbia quota owners must balance catch and quota within 30 days of Fig. 5. Percent of TAC of the BCTO usage for selected fish stocks from the landing date, and SETF owners have until the end New Zealand. Note: Positive values imply that quota was converted into the fish stock and negative values imply that quota was converted out of of the fishing year. the fish stock. The labels correspond to fish stock (BNS ¼ bluenose, In Iceland, the Fishery Directorate immediately notifies BAR ¼ barracuda, ELE ¼ Elephant fish, FLA ¼ flatfish, GUR ¼ gurnard, vessels that have catches over their holdings. After 3 days, LIN ¼ ling, RCO ¼ red cod, STA ¼ stargazer), which are species–region if the vessel does not have quota to match its catches, its combinations (represented by the numbers). TAC: total allowable catch; fishing permit is suspended. This immediate response is BCTO: bycatch trade-off. possible because of the real-time data monitoring and an online catch-balancing program. All the ports of landing electronically transmit catch information to the Fisheries overruns occurred because some participants fished Directorate twice a day. Many in Iceland argue that such for species for which they held no quota [36], referenced rapid catch reporting and real-time monitoring avoids by [4]). surprises that might arise if fishermen have a longer period Although the Nova Scotia system was eliminated, some to balance their catch and quota. current participants in the quota program think it could be resurrected. Supporters of this view believe that better 3.6. Discarding market information could improve the setting of exchange rates, which in conjunction with limiting the use of quota Most programs have general prohibitions on discards of exchanges to unintended incidental catch that cannot quota species. Nova Scotia allows no discards of ground- reasonably be covered with quota acquisition, would fish by licensed groundfish trawlers. New Zealand generally prevent abuses (Giroux, personal communication, 11 does not allow discards except for certain species, such as January 2005). lobster, where survival rates are high. Iceland permits British Columbia also has a species exchange system discarding for live young haddock and cod caught on a similar in some ways to Iceland’s. According to Bruce handline.45 In British Columbia, discarding of quota Turris (personal communication, 18 November 2005), species is permitted, but discards are counted against British Columbia’s program allows fishermen to convert annual quota based on mortality estimates. their quota to groundfish equivalents where pacific ocean perch is the base. Under the rules, fishermen are 44Allowing for balancing after the season can get very confusing, able to exchange pounds of one species for another in terms however, as this period will overlap with the start of the new fishing season and can introduce additional administrative and accounting costs. of groundfish equivalents. To date, this is a rarely used 45This catch typically is counted against annual quota at a 50 percent (if at all) flexibility mechanism in the British Columbia discount, but the total amount cannot exceed 10 percent of the vessel’s system. total catch. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 15

Few estimates of discards are available, but Iceland has permitted in New Zealand until 2001. In this case, quota- produced estimates for cod and haddock in recent years. owner 10 can upon agreement with quota-owner 11 use Between 2001 and 2003, cod discards were estimated to be some of quota-owner 11’s quota to cover his catch without between 0.4 and 1.8 percent of total landings, with a formally making a transfer. downward trend, and haddock varied between 3 and 5.8 Another design mechanism that simplifies catch-quota percent of total landings, with an upward trend.46 matching is the grouping of multiple species into an According to fisheries biologists in Iceland, the different aggregate for which a single quota is issued. For species in trends in discards most likely are connected to recruitment the aggregation, the catch of each is allowed to vary, but trends. Cod recruitment in recent years has been near or the quota for the aggregation limits the total catch of all below average, whereas haddock recruitment has been species. Nova Scotia uses a species aggregation for a group exceptionally strong. of flatfish and SETF aggregates warehou. New Zealand A key characteristic of the SETF system that differs relies on numerous aggregations. For example, it has a from the others is allowing discards that do not count flatfish aggregation that includes six species (black floun- against your quota. Discarding occurs for a range of der, brill, New Zealand sole, greenback flounder, lemon reasons, including lack of quota, highgrading, damage to sole, sand flounder, and turbot), a hapuku and bass fish, and weak markets for landings (Towers, personal aggregation, and a jack mackerel aggregation that also communication, 12 May 2005). While regulators and the includes slender and horse mackerel. industry are attempting to decrease discards, most cur- New Zealand adopted aggregations for species with little rently accept it as an unavoidable part of multispecies IFQ differentiation in data reporting before the introduction to management. The ability to discard effectively eliminates the QMS and for species with little market differentiation the possibility that catch of any one species will be (Banks, personal communication, 17 February 2005). In constrained by the TAC of another. these cases, managers considered the benefits of introdu- In the SETF, managers believe that discarding accounts cing individual species as separate quota stocks insufficient for a large, though highly variable, percentage of catch for to offset the complications that would result from separate certain low-value species and is significant for some higher reporting and setting individual TACs. Undoubtedly, the value species as well. Estimated discard rates in all zones likelihood of any individual component species constrain- increased slightly in 2001 and were highest for redfish off ing catches of other species and problems of balancing New South Wales (65 percent); mirror dory in New South catches with quota are reduced. Wales, Victoria, and eastern Tasmania (54, 84 and 89 percent, respectively); and inshore ocean perch off New 4. Discussion South Wales and eastern Victoria (70 and 77 percent). Discards of mirror dory, redfish, ocean perch, and eastern The multispecies IFQ systems surveyed all provide gemfish are considered to be a major issue in the fishery flexibility mechanisms for balancing catches and holdings. [24]. We summarize the use of the different mechanisms in As part of the accreditation for authorizing exports of Table 3. In the table, a Y indicates that the instrument fishery products, regulators are required to quantify currently is used as a catch-balancing mechanism, and the discarding in the fishery and then reduce it by 40 percent. box is shaded to represent changes over time in the limit, Managers have informed the industry that reporting of availability, or both. Two observations are worth empha- discards is not an offence and that any discards of quota sizing. First, programs employ multiple instruments to species reported will not be taken off the individual’s quota provide more dimensions over which the quota owner can holdings. Managers intend to use these data to reduce the balance catches and holdings. Second, the systems and level of discards through spatial and temporal closures or rules regarding catch balancing are dynamic, with many gear restrictions, such as increased minimum cod-end mesh programs trying and then canceling different options or size. Managers are hopeful that these measures will achieve changing the parameters. Both observations imply that no the 40 percent reduction goal, particularly for species that one design is optimal and that participants involved in are limited by low TACs. multispecies IFQ systems are responding to changing conditions and information. 3.7. Additional flexibility mechanisms Our survey also found, not surprisingly, that the design of the systems follows directly from the characteristics of While we have covered the most utilized mechanisms, the fisheries and the goals of fishery management. An there are some additional ones that are or were in use. implication of this is that it is difficult to compare the Between 1986 and 2001, fishers in New Zealand could relative performance of a flexibility mechanism across the surrender their catch to the government. Fishing on behalf programs. For example, under the Australian management of other relationships is permitted in Iceland and was system, discards are permitted without deduction of quota. The importance of other mechanisms to catch matching is 46Sources of this information are Pa´ lsson [37,38],Pa´ lsson et al. [39,40] diminished severely given the liberal discard rule. Similarly, as translated to us by O´ lafur K. Pa´ lsson. the importance of the cod fishery in Iceland is reflected in ARTICLE IN PRESS 16 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]]

Table 3 Use of flexibility mechanisms in multi-species IFQ programs

Note: Y and specific rule indicate that yes the instrument is employed; shaded box indicates that the system employed the instrument at one time; shaded box with a Y or rule implies that the rules regarding the use of the instrument have changed over the course of the program. ACE: annual catch entitlement.

their system of ‘‘cod equivalents,’’ under which exchange of conversions into the species persist over many years. shares across species is measured against cod and cannot be Deemed values differ from the other mechanisms because used to create cod shares. their use is akin to creating quota as opposed to a shuffling While rankings are not possible, there are some strong of existing or future quota, either within or across species. patterns that we observe across the systems. First, the Therefore, continued non-marginal use of deemed values amount of leasing of quota or sale of ACE is significant has the greatest potential risk of overexploitation. across the programs.47 Quota leasing and ACE sales are Managers can reduce the risks associated with the use of the primary mechanism to match ex ante quota holdings each of the mechanisms in a number of ways. First, with expected catches or to reconcile discrepancies after instituting limits on the level of use could reduce overages. landing the catch. Other mechanisms in Table 3 are Iceland has implemented upper limits on the use of their utilized, for the most part, to match catch and holdings mechanisms, with the goal of preventing abuses.48 Another at the margin. For example, the median fish stock’s volume option is to set incentives such that quota owners find it in of carry-forward, carry-back, bycatch trade-off (BCTO), their interest to not over use the mechanisms; for example, deemed value, and cod equivalence conversions basically by using differential deemed values or graduated penalties are within 10 percent of the TAC. The median volume of for overages. Managers also can address TAC overruns carry-back in Iceland and BCTO in New Zealand is much explicitly in the TAC-setting process, either by reducing the closer to one percent of the TAC. However, we do observe TAC of the jointly caught stock or, if appropriate, exceptions to this pattern. For example, certain stocks in increasing the TAC of the overcaught stock. Relatively the BCTO system had usage totals at 50 percent their TAC. little attempt has been made to coordinate TAC setting in In designing multispecies IFQ systems, managers need to multispecies fisheries. New Zealand and Australia are consider that the potential risks of overexploitation vary moving in that direction, but it remains to be seen whether across the mechanisms, everything else being equal. Lease they will be successful. or ACE market transactions with retrospective balancing Setting permissible limits or incentives for each mechan- simply reshuffle quota amongst the participants in a given ism imposes varying degrees of informational requirements year and therefore have negligible risk. Rollover provisions over and above those needed to set TACs and varying allow shuffling of quota over time, and because the levels of regulatory oversight. On this dimension, leases, programs do not allow owners to accumulate banked time limits for retrospective balancing, and limits on quota, a TAC overage will be temporary, leading to little rollover provisions likely are on the low end of the additional risk to the viability of fish stocks. Species spectrum. Species exchanges and deemed values, on the exchanges allow reshuffling of quota between species other hand, require additional information when setting within a given year, and if there are large differences in the exchange rates or levels and could have knock-on TACs levels, overexploitation is possible, especially if effects in the lease market. In both cases, for example, managers need to gauge the potential incentive for 47Given the information collected by fishery managers, it is difficult to targeting behavior (or bycatch avoidance) against the discern the reasons for quota leasing or ACE sales. For instance, leases potential harm to the stock caused by the allowed overage could be due to contractual arrangements between owners who own but do not fish quota (e.g., processors or investors) and/or trades between harvesters to balance portfolios with either expected catches or after the 48In addition, vessels in Iceland are not allowed to commence a fishing fact. trip unless they have sufficient catch quota for their probable catches. ARTICLE IN PRESS J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] 17 and the incentives to land catches rather than discard at Another issue in the design of the programs is the sea. While setting an optimal level is a very complex administrative burden associated with the mechanisms. problem, in practice the exchange rates in Iceland are based Each of the programs has faced problems with the on ratios of expected total revenues in the coming year, and additional complexity in recordkeeping that accompanies deemed value rates are set as some fraction of average ex- flexibility mechanisms. Nova Scotia and New Zealand vessel price over the season.49 abandoned the use of species exchange rates partly for this When contemplating the set of instruments and their reason. Given that these programs installed these ap- design, managers need to consider the possibility for proaches prior to the information technology revolution, it interaction effects between the options. For example, we is not surprising that these tasks were costly and that data find that more than 30 fish stocks in New Zealand had delays were frequent. The real-time, web-based catch occurrences, sometimes over many years, where the recording and quota balancing in Iceland is a notable aggregate catch of a species was covered with deemed exception, and many managers believe that it is the value payments at the same time that the species was used linchpin for their success. With fisheries such an important in the BCTO scheme to cover the catch of a bycatch commodity in Iceland’s economy, the costs of implement- species. This implies that quota owners covered their catch ing such a system are more tenable. For some fisheries with of the target species by paying the deemed value while lower value, it is not clear that such costs are practical; simultaneously converting their target species quota into however, the costs of developing web-based data programs bycatch quota. We also find cases where species catches are coming down. were converted into in BCTO and deemed values were used to cover catch. This latter case can lead to higher TAC overruns. 5. Conclusion Another factor contributing to overexploitation risk is whether the set and level of each flexibility mechanism Managing fisheries where a number of species are caught causes unreported discards at sea to increase or decrease. jointly is a difficult task, regardless of the type of All things being equal, it is preferable to have information management system used. Differences between the ratios on overages via reported use of the mechanisms than to not of catch rates and desired total catch levels across species have the information. To eliminate the potential for can constrict total catches of some species below desired unreported discards, the British Columbia program em- levels or allows catches of other species to exceed them. ploys 100 percent observer coverage.50 In Nova Scotia, IFQ management helps address this problem by providing New Zealand, and Iceland, partial observer coverage, individuals with economic incentives to match catches with along with catch profiling, accommodating flexibility quota holdings and, as a consequence, total catches with mechanisms, and stiff penalties for violations apparently total quota. As demonstrated most clearly in the British has been sufficient to inhibit extensive discarding. The Columbia groundfish fishery, the combination of the permitting of unreported discarding of IFQ and non-IFQ incentives provided by the market and the monitoring species in Australia is an anomaly in our study.51 and enforcement program can lead to substantial changes in fishermen’s behavior and therefore in relative catch rates 49Because lease prices are measures of profitability per unit of catch [28,41]. (prices minus marginal costs of fishing), it follows that in a well- While all of the IFQ programs reviewed include multiple functioning lease market, lease prices should be a fraction of ex-vessel species that are caught jointly, the complexity of the prices. Therefore, the Icelandic and New Zealand systems are likely to fisheries varies, and this has implications for the need and have a smaller effect on the performance of the lease market than if the use of catch-quota balancing mechanisms. For example, in limits were set lower, everything else being equal. Iceland also limits the potential knock-on effects in the market by limiting the amount of quota a large system like New Zealand’s, with more than 93 that can be converted across species. Theoretically, all flexibility species and 550 stocks (and more being added), the mechanisms can affect market performance, and this is especially true probability is higher that ex ante holdings do not match with species exchange programs and deemed value systems, as both catches and that the catches of some species are likely to be systems represent an additional level of information and government constrained by quota of others. This is particularly true if participation. 50Branch et al. [28] have found that the at-sea observer coverage has there is little information to set the TACs for stocks that resulted in changes in target behavior and consequent changes in species are primarily taken as bycatch or if species in the catches so that they aligned more closely with TACs. For example, multispecies complex have very different life history traits fishermen are making a short, sample tow to assess the suitability of the that can lead to greater variability in stock levels across mix of species when entering a new area and are investing in gear that years and/or variability in the level of the mixing of the allows for selective harvesting [41]. 51Although incentive to balance catches with quota remain since stocks. For systems with these traits, more flexibility handling bycatch is costly and fishermen generally do not want to discard in catch-quota balancing may be necessary to avoid fish, legal discarding greatly reduces incentives to avoid species for which the individual does not hold sufficient quota. Nevertheless, the large (footnote continued) volume of ACE transfers in the SETF indicates that individuals do species complex, but the effects on the fish stocks over time would likely attempt to acquire quota portfolios to balance catch. The flexibility reduce the profits in the long run, especially if the costs of fishing are allowed by discarding may increase short-term profits from the multi- dependent on the size of the fish stock. ARTICLE IN PRESS 18 J.N. Sanchirico et al. / Marine Policy ] (]]]]) ]]]–]]] constraining the profitability of the complex. Too much by the New Zealand Ministry of Fisheries and the flexibility, on the other hand, can lead to persistent New Zealand Seafood Industry Council (Holland), US overruns in TACs and lower the incentives for quota NOAA Alaska Fisheries Science Center, and US NMFS owners to change their targeting behavior to limit the catch Northwest Regional Office (Sanchirico P.O. # AB133F04- of incidental species or to align their portfolios of catch SE1116), and Resources for the Future (Sanchirico). rights with their expected catch of species. 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